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Author: 



Thurber, Francis Beatty 



Title: 



The relations of railroads 
to the public 

PI3.C6' 

[Washington, D.C.] 

Date: 

[1 879] 



qq-S^/^P-V 



MASTER NEGATIVE # 



COLUMBIA UNIVERSITY LIBRARIES 
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BIBLIOGRAPHIC ri/IICROFORM TARGET 



ORIGINAL MATERIAL AS FILMED - EXISTING BIBLIOGRAPHIC RECORD 



lUSlNESI 

530.7 
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Thurber, Francis Beatty, 1842-1907. 

The relations of railroads to the public. A statement 
prepared by F. B. Thurber, esq., of New York city, in 
reply to inquiries submitted to him by the chief of the 
Bureau of statistics., Washington, D. C. rWashinerton, 

1879] 



cover-title, 18 p. 23 



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1. Bailroads— U. S.— Rates. 2. Railroads— New York (State) i.U. S. 
Bureau of statistics (Treasury dept.) ii. Title. 



A 13-1595 
Railway Economics. Printed by L. C. 




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THE 



EELATIONS OF EAILROADS TO THE PUBLIC. 




A STATEMENT 



PREPAllED BY 



F. B. THURBER, ESQ , OF NEW YORK CITY, 



IN REPLY TO 



INQUIRIES SUBMITTED TO HIM BY THE CHIEF OP THE BUREAU 

OF STATISTICS, WASHINGTON, D. C* 



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THE 



EELATMS OF RAILROADS TO THE PUBLIC. 



A STATEMENT 






PKEPARED BY 



F. B. THURBER, ESQ., OF NEW YORK CITY, 



IN REPLY TO 



INQUIRIES SUBMITTED TO HIM BY THE CHIEF OF THE BUREAU 

OF STATISTICS, WASHINGTON, D. C. 



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INFORMATION FURNISHED BY MR. F. B. THURBER, OF NEW YORK, IN 
REGARD TO DISCRIMINATIONS IN RAIL RATES AGAINST THAT CITY, 
THE LINE OF POLICY PURSUED BY THE NEW YORK TRUNK LINES, 
THE OPERATIONS OF THE WEST-BOUND APPORTIONMENT SCHEME OF 
NEW YORK, TERMINAL CHARGES, AND THE RAILROAD PROBLEM OF 
THE COUNTRY, WITH A STATEMENT IN REGARD TO THE INFLUENCE 
OF CAPITAL TOWARDS DETERMINING THE COURSE OF COMMERCE, IN 
REPLY TO INQUIRIES ADDRESSED TO HIM BY THE CHIEF OF THE 
BUREAU OF STATISTICS. 

N. B. — ^The following inquiries were originally addressed to Mr. Thurber in May, 
1878, and his reply was dated May 21, 1878. He has, however, revised the whole and 
returned it to this office under date of June 13, 1879. 



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INQUIRIES ADDRESSED TO AND ANSWERS FROM F. B. THURBER, OF NEW YORK. 

Question 1. Do you regard the establishment and maintenance of lower rates be- 
tween ports in Europe and points in the interior of the United States than the com- 
bined ocean rate from the foreign port to New York, and the railroad rate from New 
York to the interior point, as in the nature of an unjust discrimination; and, if so, what 
measures, in your opinion, should be adopted for preventing it ? 

Answer. I regard the establishment and maintenance of lower rates between ports 
in Europe and points in the interior of the United States than the combined ocean 
rate from the foreign port to New York and the rail rate from New York to the interior 
points as an unjust discrimination, for the reason that the two methods of transportatioa 
are entirely 8ei)arate and distinct from each other, bulk having to be broken and the 
goods handled at the end of the ocean voyage in any event. There can be no more 
economy of transport by making a through rate in Liverpool to Chicago, via New 
York or any other port, than there is in making the ocean rate separately and allowing 
the railroad lines to make the rate from the seaboard to Chicago. This, of course, is 
under the supposition that in both cases the goods are transferred from the ship to the 
car in the same manner, whether on a through bill of lading or not. In 1877, from January 
until September, through freights from Liverpool to the West on fourth-class goods were 
carried at l^shilliTigs and sixpence net per ton, equal to 13f cents per hundred pounds, 
to Chicago, and 14 to 15 shillings net, or 15^ to 16| cents per hundred pounds, to Saint 
Louis ; w hile at the same time ocean freight rates to New York alone from Liverpool 
were 12 shillings and sixpence and 10 per cent, primage for the same goods per ton; 
or, in other words, New York merchants were charged 10 per cent, more for the car- 
riage of the same goods from Liverpool to New York than Chicago merchants were 
""^ charged for taking the same goods (through New York) 1,000 miles further ; the effect 
OI of this being to forcibly and abruptly take from the merchants of New York trade 
,_^ which naturally belonged to them and give it to the merchants of Chicago. I do not 
think that any common carrier has the right to thus abrogate or be a party to abro- 
gating the natural advantages which a community may enjoj'. Such practices un- 
questionably make investments uncertain, discourage legitimate business enterprise, 
and should be prohibited by law. Discrimination of this kind is a protection of for- 
eign manufactures against home manufactures ; for instance, the hardware manu- 
facturers of Birmingham and cotton manufacturers of Manchester can lay down their 
products in our Western markets chea4)er than the manufacturers of the Eastern States 
can. The former owe no allegiance to our government, pay no taxes, and are com- 
mercial "car|)et-baggers"; the latter are American citizens, and are entitled to fair 
treatment. The above is an examjde of the constantly-recurring anomalies in com- 
merce at the present time, resulting from the control of steam-power by large organ- 
izations of capital, and which must be regulated in the interest of the public unless we 
would build up class distinctions and perpetuate a moneyed aristocracy. I would pro- 
hibit such practices by State and, if necessary, by national laws, against charging 

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2 APPENDIX. 

more for the carriage of freight for a less than for a greater distance, except where 
the principle of rednced cost entered into the (inestion, an<l this is not the castMn the 
instance above given. It nuist not he confounded with the j)ro rata principle in 
land transportation, because in this the principle of cost does enter largely into the 

question. . ■• , i. m. i 

Question 2. Do von consider that the discriminations above mentioned have resulted 
from competition "between ocean lines in connection with the New York Central, the 
Erie, the Pennsylvania, and the Baltimore and Ohio Kailroads, or that they are the 
result of the etlVirts of those roads to meet rates made by the steamer lines in cimnec- 
tion with the Grand Trunk Railroad, and its connecting lines from Montreal, Port- 
land, ami Bostcm ? IX i^xl «• A 

Answer. I understand the above discrimination to have been the result ot theettort* 
of the trunk lines to meet rates made by the steamship lines in connection with the 
Grand Trunk Railroad and its connecting lines from Montreal, Portland, and Bos^en. 

Question X Is it not true that the average steamer rates which prevail between New 
York and Liverpool are less than those which prevail between Boston an<l Liveri)oo^ 
or between Philadelphia and Liveri»ool, or Baltimore and Liverpool? 

Answer. Average steamer rates between New York and Liverpool are generally lower 
than between other seaboard ports, the reason for this being that in many respects- 
New York is a more desirable port ; the principal reason being, perhaps, that it is more 
accessible, and freights both wavs are more easily obtained. 

Question 4. Referring to the results of the recent discrimination in rates as against 
New York and in favor of Boston, which prevailed during the year 1878, leading to a 
large diversion from New Y'ork to Boston, please to state, with as much particularity 
as von may be able, the principal commodities or classes of commodities thus diverted, 
statin" whether they were of domestic or of foreign production ; if of American pro- 
duction, in what State or States produced, and if of foreign i>roduction, of what countries 
thev are the product. It is the object of this in<iuiiy to ascertain as nearly as possible 
the^nactical ettect of such discriminations against New Ytuk. Y'ou may elucidate the 
subject in any manner you may deem proper, if you do not think a specific answer to 
the'iniiuirv will properly bring out the facts in the case. 

Answer.' There has generally been a small permanent discrimination in west-bound 
rates a^-^ainst New York and infiivor of Boston, owing to the fatt that the Grand Trunk 
is consfdered a less desirable route by which to ship goods, and consequently in order 
to get business it has to ofter inducements in the way of a lower rate. When this in- 
ducement has been small it has principally atfected the heavier and least valuable class 
of ^-^oods but when rates are much less, as they have been several times (the last 
inst^ance being in Januarv, 1878), the ditlerence has been so great that almost all classes 
of troods have been equallv atfected, and not only were goods shipped from N»^w York 
to Bostonandfrom thence to Chicago, by the way ()f the graiid trunk line,./or/e«.s//*r(« /m// 

the \eic York rates, but goods were shipi)ed from New York to Boston and back again 
throu'^h New York over the Erie road to Chicago at rates far b«'low those ruling irom 
New York. As to whether the goods thus atfected were mostly of foreign or domestic 
product, I should say perhaps of about equal amount, foreign goods of all varieties 
used in the West as well as goods manufactured in New York and all the Eastern States 
beincr atlected. As you state in this question that the object is to ascertain as nearly 
as possible the practical etfect of the recent discrimination against New York, I would 
add that the damage occasioned by these anomalies in our transiiortatiou system is. 
not confined to the actual number of tons of freight carried out of Boston during the 
period when rates are less, but there is also a substantial injury done to the prestige 
of New York as a commercial center, and in the general shaking up and disturbance 
which thev occasion in the settled channels of trade. 

Question 5. In view of the fact that New York City is practically the trade center 
of a verv laro-e inoportion of the manufacturing enter]»rises of the New England States, 
do vou iiot consider that the commerce of New Y'ork from these sources is largrly pro- 
moted by the low rail rates on Western productions over the New York Central Railroad 
and its connections to the towns of New England, and by the low rates tor the trans- 
portation of the manufactured products of the New England factories to all points at 
the West and Southwest over the same roads ? 

Answer I think that the business of N<'W York is promoted by equitable rates from 
the West to the New England States and from the New England States to the West, as, 
unnuestionablv, New York shares to a greater or less extent in the prosperity of New 
Enffland • but'l do not think that this is any reason why New England should have a 
lower rate of carriage than New York, or even as low, because, laying aside the infiu- 
ence of distance on through business, the volume of business d(me at New York entitles 
her to lower rates of transportation than any other seaboard city. It is well known 
that the cost of transportation bv rail decreases faster as the volume of business in- 
creases than the cost of doing any other business; or, in other words, a large business 
in transportation can be done cheaper in proportion than a Jarge business m almost 
any other branch of commerce. 



REPORTS OF EXPERTS. O 

Question 6. Please to present such facts as may appear to yon to be of value in order 
to indicate the nature and extent of the discriminations made in tiivor of jobbing iner- 
chants at interior points on shipments from New York, and explain how such discrimi- 
nations operate with respect, first, to the interests of small purchasers in the interior; 
second, to the commercial interests of New York, and, third, to the interests of the 

transportation line. ^ ,, .i • • i i i 

Answer. It has been the practice for a number of years for all the principal railroad 
lines rJinning from New York to the West to make special contracts with wholesale 
houses in the'interior, at almost all principal i)oints, at a rate far below their printed 
schedule of rates, which, in the absence of agreement, the public generally have to 
pay. The following are illustrations of the great difference thus made, and which is 
by many believed to be excessive : 

(Yrom report of committee on railroad transportation of the New York Chamber of Commerce, Febru- 
^ ^ ary 28, 1878.) 

''An important discrimination, also, against the jobbing trade, particularly of this 
city is in the form known as the special contract .vfstem, by which wholesale houses in 
the interior are given rates from fifty to seventy-five per cent, cheaper than the gen- 
eral public ; and for illustration on this head we refer to annexed schedule, marked E." 

Schedule E.— Special Contracts.—" The winter schedule rate from New York to 
Syracuse is 50 cents per 100 pounds for first-class goods, 40 cents for second-class, 34 
cents for third-class, and 23 cents for fourth-class, and these rates the great mass of 
people have to pav ; but a few favored wholesale dealers in Syracuse are given con- 
tracts bv which ail classes of goods are carried for 12 cents per hundred imunds, as 
against the .50, 40, 34, and 23 which the public generally have to pay, and the same 
is true of all the other jobbing centers of the State. The same principle also holds 
good in the treatment which the great mass of the people of the State of lUiiuus, and, 
indeed all other Western States, are forced to submit to. The reduced rates of the 
pooled'lines to Chicago are now 75 cents per hundred for first-class, 60 cents for second- 
class, 50 cents for third-class, and 40 cents for fourth-class (lately $1, 80 cents, 60 cents, 
and 45 cents, respectively), while favored parties have been given contracts running 
through the year at 25 cents per hundred on all classes." 

This form of discriniination atfects, — , ^ , • 

First. The small purchasers in the interior, virtually prohibiting them trom buying 
in the most favorable markets, for they are discriminated against so largely that they 
are obliged to stay at home. -, ^ -. 

Second. The coinmercial interests of New Y^ork areunfavorably a ftected, for its mer- 
chants are thus obliged to sell their goods to the wholesale houses in the interior, who 
are thus favored in freights, at such prices as they may see fit to give. Practically 
the wholesale houses in the interior are subsidize<l so that they may break down the 
wholesale houses on the seaboard and monopolize the trade of the retail merchants of 

the interior. ^ ^ , ^v. ^ , /. .i 

Third. The interests of the transportation lines are unfavorably affected, tor they 
are virtually concentrating the business in the hands of a few wholesale merchants, 
who pay them very low rates, instead of doing business with a large number of smaller 
merchants who would be glad to pay them a higher and reasonably remnnerativo 
rate, but who an; prevented from buying their goods in the seaboanl markets, as they 
used to do, by the prohibitory rates which are maintained. The passenger traffic of 
the roads is also greatly injured by this practice, as the larger the number of mer- 
chants who do business with the seaboard business centers, the larger would be the 
number of busim'ss men travelling, and I therefore believe it not only to be an unjust 
discrimination against the interest of the wholesale merchants on the seaboard, but 
also against that of the smaller purchasers in the interior, and of the roads them- 
selves? While I do not think it feasible or right to require common carriers to trans- 
port a small quantin of goods as cheaply as they would a larger iiuaiitity, yet I be- 
lieve with Mr. Fink, that a car-load should be the maximum ciuantity required to 
secure the lowest rate, and I believe further, that shippers of less than a car-load should 
only be chanjcd the additional rate which it costs to transport goods in smaller quantities. It 
is unqucstionabhf true that the qreat mass of the people hare been charged a mueh higlur pro- 
portionate rate than theif should hare been charged, in order that an unreasonably low rate 
could be ffiren to a few farored individuals. I believe that the equitable adjustment of this 
matter is of greater importance than almost any other single defect in our transportation sys- 
tem, and it should receive the careful examination of experts in order to determine what addi- 
tional rate it costs to receive, transfer, and deliver quantities less than a car-load as compared 
with a car-load, and then ivith this light an equitable adjustment should be made. 

Question 7. In what manner and to what extent are the interests of trade injuriously 
aflfected by sudden and unadvertised changes of tariff' rates ? In your opinion, how long 
should any proposed change in a tariff" sheet be advertised prior to making the changes 1 
Answer. Sud«len and unadvertised changes in the rates for transportation, it tre- 
quent, are unquestionably injurious, as it makes commerce somewhat of a lottery,^ 
and it would probably be more beneficial to trade interests if changes m the rates ot 






I -^ 



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4 APPENDIX. 

transportation did not take place more frequently than twice per year. I have not fully 
considered the question of how long a notice ought to be given m any contemplated 
chancre in rates, but am under the impression that ten days would be a reasonable period 
for such notice. This would usually prevent loss to shippers on contracts wnich had 
been taken based on ruling rates, and would not be so long as to embarrass tor any 
considerable period the traffic of the roads by withholding shipments in case ot a con- 
templated decline or hurrying them forward in case of a prospective advance. 

Ouestion 8. In your opinion, what action, legislative or otherwise, is necessary m 
order to prevent any departure from published rates by anyone of the various methods 

^ Answef. It seems to me probable that, in case uniform rates to all shippers undeT 
similar circumstances were once prescribed by law, carriers would naturally and 
easilv fall into line and comply with the law. If, however, experience should prove 
that there were many ways of avoiding the law, legislative ingenuity ought to be able 
to meet these evasions, the same as it has in our internal-revenue laws and many 
other laws by which society is regulated. ,,,.,. . . „v^„i^ i:,„:f 

Ouestion 9. Can yon formulate a general rule which, m your opinion, should unit 
distriminations in freight charges in so far as relates to quantity carried f Mr. Albert 
Fink has expressed the opinion that this discrimination should be limited to single 
car-load lots, bevond which limit an absolute uniformity of rates should be observed. 

Answer. I think that the line as drawn by Colonel Fink, at the quantity of one car- 
loatl is perhaps the first practicable step to be taken in equalizing charges tor trans- 
portation ; but, as stated in answer to question 6, Colonel Fink does not go far enough 
in this direction to do justice to the great mass of shippers who, unquestionably, are 
those that usually ship in less quantity than one car-load. The probable difference in 
the cost of transporting merchandise in quantities of a car-load and in less quantities 
should be ascertained as nearly as may be by examination of the question by experts, 
and this additional cost and no more should be charged to such shippers. Ihe prin- 
ciple of ''equality on the 'King's highway'" should be here applied as tar as possible. 
The riffht of the citizen must here limit the operation of the law of wholesale and re- 
tail: the vote of the small shipper had as much to do with conferring the franchises 
nnder which railroads are operated as did that of the large shipper, and from this point 
of view he is entitled to as much consideration. ^ ^ r» i- f n^.^r»^.^r. «f 

Question 10. Referring to the second proposition on page 6 of Report ot Chamber ot 
Cmumerce Committee on Railroad Transportation, please to state what general or 

special remedv was therein contemplated. , ^, . -i- „.!..„ 

Answer That touched upon in answer to question 1, namely, that, if necessarv, leg- 
islation must be invoked, not only at New York, but at all the ports, to remedy this 

*^^ Oue«tioii"n!' Do von regard the recent discrimination in rail rates in favor of Boston 
as a measure intended by the railroad managers to be inimical to the interests of New 
York Citv or do von regard such discriminations as the result ot a contest by New 
York roads for the puri)ose of forcing rival roads out of Boston to a conformity with 
the established New York rates ? . „ j- ^ ^ 

Answer. The recent (1878) discrimination in rail rates in favor of Boston was un- 
ouestionablv not intended to be, by the railroad managers, inimical to New York City, 
but the V were the result of attempts by the pooled trunk hnes to force the Grand 
Trunk Road into maintaining a higher schedule of rates than the managers of that 
road saw fit to maintain, or, looked at from a New York railroad manager s standpoint, 
it was occasioned by attempts to meet the competition of the Grand Trunk Road. This, 
however is not in all respects a fair statement of the case, because the extreme low 
rates which ruled for a time were first made by the pooled lines as a punishment to 
the Grand Trunk Road for having carried at much higher rates, but which rates were 
somewhat lower than those established by the pooled lines. • , i „^„^„ 

Ouestion 12. Please to present a statement showing the relative tenninal charges 
at Boston, New York, Philadelphia, and Baltimore, with reference to certain specifac 
commodities. By this is meant the terminal charges as they affect particular kinds 
of^mmodities in their passage through New York, first in the ^«'"-«« «/ ^Jf; f' .^^^ 
second bv direct transshipment. In this connection please to present two illustra- 
tions or sets of illustrations going to show the lelative terminal expense at Boston, 
New York Philadelphia, and Baltimore. First, on commodities imported from Europe 
and to be shipped directly to interior points; second, on commodities P^'-^^ed in ware- 
house at New York prior to shipment ; third, on commodities which pass through the 

^ A^^wer. TWs question is, perhaps, the most difficult of all those asked to answer 
intelli.'entlv, and it is almost impossible to answer it comprehensively, as it involves 
not on!v wh/it is known as terminal charges, but the whole routine of commerce at 
the four principal seaboard cities, both in import and export business, and m order to 
^ive a correct idea, it would have to embrace all the principal items of merchandise 
I have however, consulted with a large number of prominent merchants in different 



i'5 



REPORTS OF EXPERTS. ^ 

branches of trade, with the following general result : as regards ships, while tlie spe- 
cific charges of pi otage, towage, wharfage, supplies, &c., vary in some degree at the 
d ffertS po ts, tlK.re are corresponding advantages and <^'«^t"''1-^^' Vw Yorf hf. 
equalize each other. As regards the terminal charges on merchandise. New \ork ha* 
;' lie past been at a disad^^antage as regards .^rain and other 1-;^'!-, -"^iY^S ^^^^^^ 
the w4t by rail and destined for export, and also on the heayn-r kinds of imported 
goods en ro«f. to the west, for the economical handling of which it was necessar>^ to 
brinLr cars and ships together ; but, as stated elsewhere, these have been and are being 
remedied! The foregoTng applies more especially to the second division of the ques- 
rio viz^vhere goods ha^ve direct transshipment from ship to car, or luce verm ;hnt 
as regards those charges upon commodities ''in their passage through New \ork in 
iTieSmar course of trade " the question of merch.tlhts' profits is involved and this is 
.nar morl importance on the greU miscellaneous class of goods than the mere at- 
te, ai t expenses, such as cartage, storage, labor, &c., which do not ^^^^er niater ally 
in the different seaboard cities, and in the aggregate amount to an exceedingly s all 
ercenta-e upon the cost of valuable products. On this great miscellaneous class, 

hTch compri^ses a thousand and one items, New ^'ork possesses «"l>«ta"tial advan- 
ta"es Most of the large raanutacturers, both foreign and domestic, maintain agen- 
cie's here tbr the sale of their goods, which is thus done upon the east possible margin 
of profit; varieties are more extensive, affording the best possib e «f *^^t^«"' ;";^1;,«^« 
new and attractive styles are first shewn. These advantages, ^^^th the aggregation ot 
capital which has settled here, have resulted in attracting ^^'^^^ l,l'^Zro^^eZ 
holding in a much greater degree than couhl have been expected the trade ot the iia^ 
tC "n the face of the persistent discriminations which have been ^.J^f^^X In fZ 
York bv her railroad lines. This discrimination has, of course, resulted greatly to the 
detriment of her distributing merchants, who have had to relinquish a portion of their 
legitimate profits in order to make up for these discriminations and to offset the in- 
2cemeiits offered by competing cities. In conclusion I ^ ""\^\ ^'-^y,' ^f '{^ *^«,^X^^^ 
to question 16, that there has been some misapprehension and too l>r"ad an applica- 
rion of the ag tarion by the citizens of New-York for improved terminal facihties, as 
i was designed principally to secure improved facilities for the handling ot gram 
arriving by rail, and other heavy goods for which direct transshipments from ship to 
car and from car to ship were a necessity. . , /. -i-i.- pxt^^ 

Question 13. Please to state generally those defects in the terminal facilities of New 
York City which injuriously affect it, in so far as relates to trade in which New lork 
competes with Boston, Philadelphia, and Baltimore. 

Answer. I know of no defects in the terminal facilities of New York, except those 
heretofore resulting from our inability, or more property neglect, m bringing cars and 
ships together; this applies principally to the handling ot grain amving from th^ 
West b^^rail designed for immediate export, and to the heavier class ot imported goods 
destined for consumption in the West upon which it is also necessary to make direct 
transfer from the ship to the car. We do not feel the first during a great part of the 
vear, owing to the superior facilities enjoyed by New York in having the Erie Canal, 
the canal-boats bringing this staple being at once towed alongside s^iP^ ^.J.^^:^^^!!^^* 
is to be sent abroad. And as regards impcnted goods destiiied tor the W «»*» /he recent 
authorization of the use of the Belt Line of railroad which runs along almost the entiie 
water front of the city has already enabled a beginning to be made in loading these 
varieties of goods directly from the ships upon the cars without cost of transfer and 
the full utilization of these facilities will place New York upon an equality with all 

''''Question.'\4!^in your opinion, has not the rapid diffusion of commercial informa- 
tion bv means of railway postal service and the telegraph, in connection with the pos- 
sibilitv of rapid transportation afibrded by railroads, rendered it necessary that there 
should be at every citv on the seaboard an immediate contiguity of the railroad, the 
warehouse, and the sea-going vessels, and the establishment of such facilities in the 
way of mechanical appliances and business arrangements as will insure the hmest 
possible cost of transfer from one vehicle to another f In this ^'0""ection wil >ou 
please to state how far, in your opinion, the facihties furnished at New \ork fail to 

meet this requirment? ^ . i . /• j.- ^ i,^.«„+ixr 

Answer. Unquestionably the rapid diffusion of commercial information tends gieatly 
to equalize values in difiereiit commercial centers, and in ctmnection with the possi- 
bility of rapid transportation prevents the realization of large profits to the distribu- 
tor and irreatly reduces prices to the consumer. In consequence of this it has become 
necessary to reduce to the minimum all charges upon commeTce, andthe most approved 
appliances and facilities are also necessary. As to the defects in the facilities funiished 
at New York, they have unquestionably been unduly magnified. In enumerating the 
defects in the New York railway system many persons have entirely overtooked tiie 
great natural advantages enjoyed by New York in her magnificent ^^rbor and exten- 
sive stretch of water front, which, taken in connection with that great source of 
wealth, the Erie Canal, has sustained the commerce of New York under the discrim- 
ination of her raikoads, the burden of bad municipal government, and the enteri)risiug 



r^ 






b APPENDIX. 

coinix'tition of otiier seal)o;nd citit's. There lias heeu a jjreat cry that what New York 
iu'e<led was elevators; but so far as the aj;itatiou by the citizens of New York was 
couceriKMl it Avas simply for elevators at the termini of the different railroads in con- 
nection with the Western system of j;radin«? t>;riiin. It may not be generally known 
that New Yoi:k has more elevators tlian any other city in the Union, but they consist 
]»rincii>ally of stationary elevators at the various ^triw storaj^e warehouses and fl«)at- 
in«; elevators for the transfer of «:;ra in from canal-boats into sea-jroin«; vessels, this lat- 
ter variety moving about the harbor from i)oint to i)oint by their own steam and con- 
stituting a most effective instrumentality in our terminal facilities. The New York 
Central Koad has also one tirst-class elevator for receiving and storing the grain trans- 
ported by that road, and another is in process of construction. With these and tlie 
system of grading grain, which hms but just fairly come into general use, New York 
<-annot be said to be deticient in terminal facilitit's, at least those for tlie handling of 
^raiu. 

Question 1;"). What has been the general effect of the west-bound apportionment 
scheme fnun New York upon the connnercial interests of that city, with s]>ecial refer 
ence to those interests in which it comi)etes with rival seaboard cities, and what, in 
your oi>inion, will probably be the effect of tliis apportionment scheme upon the future 
commercial interests of New York City? 

Answer. I believe that the general effect of the apportionment scheme out of New 
York, commonly known as the pool, up(m the connnercial interests of this city, with 
special reference to those interests with which it competes with rival cities, has been 
unfavorable ; not that an apportionment scheme is bad in all its features, but the rates 
at tirst established were so high that circuitous routes could cut lar";ely from the ])ool 
rates and still make money, notwithstanding their unfavorable location; second, 
owing to the number of lines in the apportionment scheme it involved the transfer of 
some freight from one line to another without the concurrence of shippers. This, in 
some cases, resulted in delay and inconvenience to the receiver of the goods, and 
savoring as it does somewhat of arl)itrary control over matters which had heretofore 
been directed by shippers or receivers of goods, it was an element of dissatisfaction 
which dealers in rival cities did not fail to magnify and make the most of. (As au 
illustration see letter clipped from the York York '^Shippiny Lint.^^) 

''Railway mismaxagement. 

"Editors Shipping and Commercial List: 

"Gentlemen: As you re])re8ent, as well as any New York journal I know of, the 
business men of New York, I desire to call your attention to a matter that is driving 
the trade away from >our city faster than anythiug I ever heard of. It is the 'pool- 
ing' system of the trunk railroads out of your city. The W^estern l)uyer now has no 
choice of the way his goods shall come. The superintendent of the ' jmoF directs and 
divides freight to suit himself. Now, if all railroad companies did their business with 
erjual promptness and dispatch, and in a business-like manner, there would be no com- 
jdaint. But they do not. Some lines will bring goods from New York to this point 
in four or live days, and settle any loss for damages promptly, while others will take 
as long as three weeks, and it is a hopeless case to attempt to collect a cent of dam- 
ages from them. Some lines have pleasant, affable gentlemen for agents; others are 
represented by some blockhead of a relative of a high otttcial, who leaves his business 
to a boy, and is hardly ever to be found in his otfice, or when found knows nothing of 
Avhat he is hired to attend to. Now, to be forced to do business with such lines is an 
outrage. They were always forced to cut rates to get any business, and even then not 
get a fair proportion. We would rather ])ay more an<l do business with reliable lines. 
It is just the same with one of these freight lines as it is with a business house. Anian 
would rather do business with a tirst-class reliable firm, and pay their ]>rice, than deal 
Avith one of those 'snide' concerns that is always playing sharp and selling inferior 
goods. I have always given the preference to the Merchants' Dispatch Line, and can 
safely calculate on getting goods in four days from New York. If w«^ have any losses 
they settle them promi)tly. There are several other lines that do just as well— the 
Star Union for instance — but we started with that line, and as long as everything 
Avas satisfactory Ave made no change. Now^ Ave send an order by letter or telegra])h 
to our merchant in New York to ship us so and so by Merchants' bisi)atch. The mer- 
chants obey orders, but the Merchants' Dispatch gets more than their share of freight, 
according to the 'pool.' The superintendent of the '1)00!' directs that my goods 
Avith others, be taken OA^er to the Baltimore and Ohio, or Erie or some other road, 
and instead of getting my goods in four days I am out of them one, two, or three 
Aveeks. I have just received a lot of goods three Aveeks out, and damaged at that. I 
d<m't belicAe I Avill ever recover a cent of damages. Noav this * pooling' arrangement 
does not exist in Boston or Philadelphia, and Ave can onler goods from either and des- 
ignate the line Ave Avant them shipped by, and get them as ordered. W^e intend, there- 
fore, to go to these places and buy our goods as far as possible. I sent orders for oA'er 
$5,(MK) AA'orth of goods this Aveek to Boston, rather than buy in New York Avhere I liaA^e 
always bought my goods, rather than b.' subjected to the outrage that is now being 



REPORTS OF EXPERTS. 7 

perpetrated by the railroad lines centering in your city. We shall avoid New York as 
much as possible until her merchants see fit to stand up and fight for their rights and 
that of their patrons. Why don't the lines ' pool' their passenger trathc the same Avay ? 
Suppose a man Avas to go to the Erie Railroad and ask for a ticket to Indianapolis or 
Saint Louis, and be told they had <lisposed of their quota for that day, and he must 
go via the Baltimore and Ohio, or the Chesapeake and Ohio, or through Canada ; it 
Avouhl not be lon^ before x>eople would give your city a Avid(i berth. If the railroad 
lines Avant to combine and keep up freights, let them 'pool' their earnings, and give 
the shipper the privilege of sending his goods as he may choose. Whether the New 
York merchants know this or not I am not aware, but as it has been going on nearly 
*a year, and they are ai)j>arently taking no steps to break it up, the only recourse a 
"Western buyer has is to let NevA^ York severely alone. I bought over !$50,()00 Avorth of 
^oods in New York last year — a small amount — but there are more like me, and New 
Y'ork will get as little as possible this year. 
" Very respectfully, 

"SUBSCRIBER. 
"Indianapolis, March 29, 1878." 

Had the rates of the pooled lines been fixed on a basis Avhich AA'ould yield but 10 per 
cent, on the capital actually paid in by the stock and bond-holders, and all s])ecial con- 
tracts been abrogated, the apportionment scheme might liaA'e proA'ed a substantial 
benefit, but there has been a strong feeling in the commercial community that it Avas 
an effort to abrogate by the pow er of a monopcdy the ordinary laws of commerce, Avhich 
laAvs, if left to Avork, would decree the failure and licpiidation of these roa<ls, the same 
as a merchant with an unduly inflated business would liaA'e to fail and lifpiidate. It 
is unquesticmably true that production and commerce in this country is being taxel in 
the Avay of exorbitant rates for transportation to a tkr greater extent than the ordi- 
nary taxation for the support of government, and that Av^hile straining at the gnat of 
ordinary taxation we have swallowed the camel in the shape of taxation for transpor- 
tation. This is illustrated by the revenues of the railroads of the State of New 
York, Avhich exceed by more than tweh^e times that of the entire revenues of the 
State derived from taxation, and the New York Central Road alone has in ten 
years paid dividends ui)on the Avatered stock Avliich Avas put into that road in the 
years 18(37-'68; dividends upon the Avatered ])ortion alone, which in ten years, with 
compound interest, amount to more than fifty-two millions of dollars. The Pacific 
railroads luiA'e during the last ten years also exacted from the public many millions 
of dollars over and above AAiiat would liaA^e been require I to have paid liberal inter- 
est and dividends upon the actual cost of those roads. The report of the iuA'estiga- 
tion into the management of the Credit Mobilier Construction Co., of the Union Pa- 
cific Road has show n that the directors of the Union Pacific Road presented them- 
selves, as directors of the Credit Mobilier Construction Co., Avith $94, 650, 287. '24 in cash, 
stock, and bonds, of Avhich they acknoAvledged |43, 929, 328.24 Avc^re profits. It is be- 
licA'^ed by many that the $^7,2;ifi,000 receiv^ed as the proceeds of bonds issued to 
them by the government Avould, if honestly expended, have been sufficient to con- 
struct the entire Avork ; and yet the commerce of this country is being taxed, and 
]>robably Avill continue to be for all time, to pay dividends upon the entire mass of 
obligations thus issued. In vicAV of such facts as these, any apportionment scheme 
Avhich involves fhe charging of rates higher than Avould be necessary to pay a fair 
return upon cajntal necessary to honestly construct the roads of which the combina- 
tion is composed, must proA'e detrimental to the interests not only of New York City 
but the Avhole country. 

Question 16. Please to mention the particular branches of trade which haA^e been to 
any considerable extent deflected from New York to other Athantic seaports during the 
last five years, and state tln^ opinion generally entertained among the leading mer- 
chants of New York as to the cause or causes which have led to such changes in the 
course of trade. 

Answer. In export trade large quantities of business, principally grain, liaA'c been 
diverted from New York to Baltimore and Philadelphia during the Avinter season Avhen 
the great natural advantages Avhich New York enjoys are neutralized by canal uaA'i- 
gation being closed, and it is at this time of the year that the distance allowance in 
favor of Baltimore and Philadelphia, together with their heretofore somewhat cheaper 
terminal charges on goods arriving by rail and destined for export, operate greatly to 
their advantage. That this distance alloAvance is unjust is proved by the opinion 
generally entertained by experts, that, owing to the volume of business done, it ac- 
tually costs the railroads less to doNcAv York business than it does either Philadelphia 
or Baltimore business, and this is virtually conced«'d by all the roads making uniform 
rates on import and export freight from and to foreign countries through all the ports. 
It is disproA'ed also by gi ving to Boston ecpial and in some instances loAver rates, not with- 
staudiug her distance to principal Western cities is greater. The foregoing relates |)rinci- 
pally to export trade, l)ut the discrimination against New York on her importing and 
distributing business is perhaps the most important and flagrant of the two. Goods 






J^ 






' 



8 



APPENDIX. 



Lave been habitually carried on special contracts, to jobbing points in New York 
State and beyond, for a few favored wholcHale merchants, at pric<'8 ranginff from 
one-lmlt to one-third those charged to the general public. This practice has had 
the ettect to lorcibly take from wholesale merchants on the seaboard and give it to 
Avholesale merchants at interior Jobbing points. This is notably true of the dry- 
go<Mls trade, and all branches of trade have thus been more or less injured. But for 
the great advantages enjoyed by New York in having the Erie Canal'a great part of 
tlie year to swell Its export business, audits preponderance of capital, these etfecta 
wouUl «loubtles8 have been more serious than they have been. 

Question 17. Have the railroads terminating at New York entered into any arrancre- 
meut Avith ocean steamer lines designed to meet special advantages atforded at other 
Atlantic seaports f 

Answer. It is generally understood that the railroads terminating at New York have 
agreed with the Baltimore and Philadelphia lines that rates from and to interior 
AVestern citie^ on export and import trade shall be uniform through all the ports, and 
tliat these roads accept their pro rata portion of the through rate. Rates from Liver- 
pool to Chicago by way of Boston, at this time, April, 1878, are some two shillini's 
per ton lower than through the other ports. This is probably attributable to the ciil - 
ting of the railroad rate by the Grand Trunk Line. 

Question 18. Are the steamer lines running out of New York to any extent pur- 
chasers of gram for the purpose of completing their cargoes to Europe ; and, if so, 
what 18 the opinion entertained by the grain merchants of New York as to the etfect 
ot such purchases upon trade ? 

Answer. I am not aware and cannot ascertain that any of the regular steamer lines 
running out of New York are in the habit of purchasing grain for the purpose of com- 
pleting their cargoes to Europe. Some time since this was done to some extent by 
the Anclior Line, but it gave such dissatisfaction to the merchants who were in tlie 
halMt of shipping by this line that the practice was relinquished. It is manifest if 
such a practice were tolerated on the part of common carriers, that at times, when 
lieight room was scarce and protits on shipments large, the temptation would be 
great for said carriers to monopolize the carrying capacity of their steamers and rule 
out the general public. The opinion entertained by merchants is that this practice is 
nntair to the commercial community and imcompatible with the functions of a com- 
mon caiTier. 

Question 19. AMiat is the present number and capacity of grain elevators at New 
York, and where are those elevators located ? 

Answer. The number of stationary elevators at the port of New York is seventeen, 
with a storage capacity of 16,420,000 bushels; the number of floating elevators is 
thirty-four with a transfer capacity per hour of 279,800 bushels. The location and 
other details in connection with these elevators, taken from the official list of the Pro- 
duce Exchange, are herewith submitted. 

Floating and stationary elevators at the port of Xeto York. 

STATIONARY. 



Xames of owners or managers. 



The Grain TVarehonsingCoin- 

r>any, Atlantic Dock, Brook- 
\Ti, office 5 Moore street, 
Ne»<r York. L. B. Shaw, 
president ; R. H. Laimbeer, 
treasurer. 



Hazeltine (t Co., 31 Pearl street 



Xames of elevators. 



Bartlett Sc Greene 



J. P. & G. C, Robinson, office 
14 Coenties Slip. 

New York Central and Hnd- 
son River Railroa*! Ele- 
vator, Whitney & Twom- 
bley. lessees. 43 Whitehall 
street 



f Stores Nos. 2 to 28 inclusive 
Stores Nos. 6 to 11 inclusive 

I 

Stores Xos. 70 to 92 inclusive 
' Columbia Stores 

Kelsey's Stores 

Central , 

J. P. & G. C. Robinson's... 

New York Central and Hud- 
son River Railroad. 



Location. 




Commercial Wharf, ' 
Atlantic Dock, 
Brooklyn. 

Clinton Wharf, At- 
lantic Dock, Brook- 
lyn. 

South Pier, Atlantic 
Dock, Brooklyn. 

Foot Atlantic street^ 
Brooklyn. 

Foot Irving street, 
Brooklyn. 

150 to 162 Furman 
street, Brooklyn. 

Erie Basin, Brooklyn . . 

Foot Sixtieth street, 
North River, New 
York City. 



1, 500, 000 
1,000,000 
500,000 
2, 800, 000 
1 500,000 



25,000 



8,000 
8,000 
5,000 
8,000 
60,000 



REPORTS OF EXPERTS 

Floating and stationary elevators at the port of Xew York — Continued. 

STATIONARY. 



Names of owners or msinagers. 



Names of elevators. 



Location. 



o 



OJ 



a o 



ci: A 



2-3 



H 



F.Woodruff & McLean, office 
103 Water street. 

United States Wareliouse 
Company, office 6 Front 
street, Ira K<^tchum vice- 
president ; F. S. Mathews, 
secretary. 

Francis E. Pinto, 37 Pearl 
street. 

Lawrence's Stores, foot First 
street. East River, office 
3 Stone street. 

Tripp, Rogers & Co., foot 
West Thirty-fourth street. 

W. H. Payne, foot East One 
hundred and twenty«uinth 
street. 

E, M. Van Tassel, Pier 39 
North River. 

E. M. Van Tassel & Co., Pro- 
vost and Twelfth streets, 
Jersey City. 

Fellows & Beyer, foot Taylor 
street, Brooklyn, E. D. 



F. Woodruff & McLean's . . . 

United States Warehouse 
Company. 



Foot Joraleraon street. 


1, 000, 000 


6,000 


Brooklyn. 






Foot Defjraw street. 


500, 000 


8,000 


Brooklyn. 







Francis E. Pinto's 
Lawrence's Stores 

Tripp's 

Payne's 



Van Tassel's 

E. M. Van Tassel & Co 

Fellows & Byers's 



Atlantic Dock, Brook- 
lyn. 

Foot First street, New 
York City. 

Foot West Thirty- 
fourth street. New 
York City. 

Foot East one hun- 
di-ed and twenty- 
ninth street, New 
York City. 

Foot Vestry street. 
New York" City. 

Comer Provost and 
Twelfth streets, Jer- 
sey City. 

Foot Taylor street, 
Brooklyn, E. D. 



800,000 
300, 000 



300, 



90, 



40, 
50, 



000 
000 

000 
000 



FLOATING. 



Names of owners or managers. 



International Grain Elevating Association, 
office 31 Pearl street, New York, E. 
Annan, president. 



The New York Floatinjr Elevator Com- 
pany, George D. Puffer, president, office 
47 Pearl street. 

The Floating Elevator Company, E. G. 
Burge8.s, president, office 39 Pearl street. 

International Grain Elevating Association, 
office No. 1 Moore street, George E. 
Nichols, president. 

The Com Exchange Elevator Company, 
office 38 Pearl street, R. H. Vaughan, 
president. 

Clark & Allen, foot East Twenty-eighth 
street. 

Hazeltine & Co., 31 Pearl street 



Charles E. Huberer, foot Amity street, 

Brooklyn. 

David Jones, No. 619 Sixth street 

W. D. Maufjam's Son, office 92 Broad street ; 

station, Pier 6, North River. 
Marsh, White & Co., foot North Fifth 

street, Brooklyn, E. D. 



Name of elevators. 



'Bolivia, Renovator, Egypt, each 5, 000 

bushels. 
Continental, Eldridge, International, 
Manhattan, Metropolitan, Russia, 
R. H. F08S, and Scotia, each 4,000 
bushels. 
Malster, 3,500 bushels; Domestic, 
1,800; Kings County and Croton, 
1,500 bushels each. 
Albany, Havre, Hudson, Liverpool, 
Oswego, each 5,000 bushels. 

New York (2 legs), 8,000 bushels ; 

Transporter and London, 4.000 each. 
Telegraph and Excelsior, each 3,000 

bushels. 



cs . 

s 



H. F. Hebbard. 



Baldwin and Columbia, each 4,000 

bushels. 
Enterprise > 



Active 

Union and Hilly er, each 3,000 bushels 



Manhattan. 



4 000 
3,000 

4,000 

2,500 

3,000 
1,000 



40, 000 3, 000 






CI 



15,000 
32, 000 

8,300 

25, 000 

16,000 
6,000 

3,000 

1,500 

8,000 

3,500 

2,000 
6,000 

5,000 



Total (17 stationary and 34 floating elevators) 16, 420, 000 279, 800 






^•^^iSXr-^XTf^Jitz. 






10 



APPENDIX. 



Question 20. Within what area in this conntry is the grain trade of New York con- 
fined? This inqniry rehites to the territory snpp lied with grain and flour from the 
New York market. 

Answer. The domestic area supplied with flour and grain from the New York market 
is very limited, l)eing oonHned to the environs of New York and a few points along 
our seacoast. Formerly almost the whole of New England was 8up])lied from New 
York, but the distribution of flour and grain by rail during the past few years has 
attained large proportions, and now the whole interior, as well as most of the small 
seaporls, are supplied by direct shipments from the West by rail. Of the enormous 
quantity of cereals and their products which find a market in New York by far the 
larger proportion are destined for export, but of course, with a i)opnlation exceeding 
two millions within the circle of a few miles, the local consumption is also consider- 
able. New York, however, depends principally upon her export trade, for which, 
owing to her being the principal seaport of the country, and having large numbers 
of steam and sail lines to all parts of the world, she enjoys superior facilities. 

Question 21. Please to mention the advautages Avhich, in your o])ini()n, have re- 
sulted from the formation of the New York railroad ap])orti(>nment scheme — 

Ist. In preventing discriminations as against the iuterests of interior i)oints, like 
Buft'alo, Pittsburgh, Cleveland, Detroit, Toledo, and Cincinnati, an<l in favor of the 
Atlantic sea ports, and generally discrimination against all that class of traffic com- 
monly known as local or non-competitive. 

2d. Advantages which may have resulted from the stability which has thus been 
secured in rates. 

3d. Advautages from the elimination of the uncertainty in the minds of merchants 
generally as to the comjiarative rates charged them and other competitors. 

Answer. The advantages which have resulted from the formation of the railroad 
apportionment are the abrogation, to some extent, of si>ecial contracts to wholesale 
merchants in Western cities, although there are indications that this rule has been 
broken in some instances. 

There is, unquestionably, an advantage in the stability of rates, provided they 
be reasonalde ; but the high rates charged by the pooled lines in a great measure de- 
feat this object. One serious break occurred owing to the competition of the Grand 
Trunk Road. Roundabout lines were able to divert considerable traffic, and various 
ovasious have taken place, as there always will when excessive tariff's are sought to 
be enforced. [Note. — As one of the anomalies in railroad management I may here 
nu*ntion that east-bound rates, with a full traffic, are usually much less than west- 
bound rates (at the present time. May, 1878, nearly 100 per cent, less) ; and this not- 
withstanding about two-thirds of the cars are hauled back to the West empty. A 
usual law of business is that the snuiller the volume of business the stronger is the 
competition to secure a share of it and the more slender are the profits; in this in- 
stance it is precisely the reverse.] Local or non competitive rates have not been af- 
fected by the apporti<mment scheme, and here the great discriuiiuation and alnise of 
special contracts remain in full operation. The advantages resulting from eliuiiuat- 
ing the uncertainties in the minds of merchants generally as to the comparative rates 
charged them and other competitors have not as yet been realized although with 
honest management these may, in time be secured. 

Question 22. Please to present your views as to the injustice of the special contracts 
above mentioned by a description of those demoralizing practices in tlie course of the 
contests between the solicitors of freights in which the nu^rchauts have been led to 
practice deceptions uixui the agents of the railroad companies, and in which the agents 
of the companies have been led to practice deceptions upon the merchants. 

Answer. In an ethical view these special c<mtracts are productive of uncertainty, 
distrust, dissatisfaction, and general demoralization. They are necessarily unfair, and 
therefore, to a great extent, secret and confidential. Merchants who would ])refer to 
have a uniform rate, which would give them no advantages over their neighbors or 
their neighbors over them, are ccmipelled, sd long as this mode of business is tolerated, 
to avail themselves of these special a<l vantages, or else they are soon distanced in the 
race by less scrupulous competitors. Irregularities in rates are a premium upon decep- 
tion in classification, and this together with other evasions are umre or less i)racticed 
both with and without the connivance of the agents of the companies. 

Question 23. Please to explain in what manner and to what extent the practice of 
making special contracts to favored shippers is in any manner influenced or controlled 
by the New York apportionment scheme as to west-bound traffic, referring, in this 
connection, both to shipments east of Buffalo, Dunkirk, Pittsburgh, Wheeling, and 
Parkei-sburg, and to shipments west of these points. 

Answer. The apportionment scheme has practically no eft'ect upon special contracts 
made to points east of Buffalo, Dunkirk, Pittsburgh, Wheeling, and Parkersbnrg. 
As regards principal points west of these named it theoretically abolishes special con- 
tracts, and if conscientiously lived up to it would be a redeeming feature of the whole 



REPORTS OF EXPERTS. 



11 



plan ; otherwise it is the most unequal and onerous form of class taxation of which 
we have any record. 

Question 24. Please to describe the Belt Line, stating the rules and regulations gov- 
erning its use by day and night. 

Answer. The BeltrLine of railroad in New York, more properly known as the Central 
Park, North and East River Railroad Company, is a horse railroad running along 
West and South streets, comprising the water front of the business part of the city ; 
thence along various streets and avenues on the east side of the city to Fifty-ninth 
street, where it crosses the city, skirting the lower boundary of Central Park, to Tenth 
avenue, and down that avenue again until it again strikes the water fronton the west 
side at West street. A portion of its route in West street above Canal has heretofore 
been occupied bv the track of the Hudson River Railroad, leading to the freight 
depot at St. John's Park on the west side of the city, and this track has been 
jointly used by the Belt Road and the Hudson River Railroad under a working 
arrangement for that pur})Ose. Recently, however, at the solicitation of the mer- 
chants, our municipal authorities have granted permission to use the track of 
the Belt Railroad for the movement of freight-cars during certain hours of the night, 
and has given power to lay switches to the various wharves and warehouses along 
it« route. It is believed that this is an important step toward improving the terminal 
facilities of New Y(nk, and bringing the cars aud shii)s together, as is done in the 
other ]>rincipal seaboard cities. It will, to a considerable extent, remove the excuse 
which New York roads have urged with some force, that New York did not extend to 
them the same facilities which other seaboard cities extended to their roads; and it is 
to be hoi>ed that it is <uily the forerunner of a more complete and comprehensive 
system of terminal facilities worthy of the principal seai)ort of a great nation. 

Questi<Mi25. You are requested to add to the foregoing inquiries any statistical or 
other facts which you may deem of interest, either with respect to the commercial 
interests of New York or with reference to the movements of or the conditions att'ect- 
iug the internal commerce of the country. 

Answer. In accordance with the re<iuest to add any facts with reference to the con- 
ditions aftecting the internal commerce of the country, I desire to call attention to 
the facts set forth in one of the reports of the committee on railroad transportation of 
the American Cheap Transportation Association, from which I have made the follow- 
ing extracts. The array of defects in the management of our modern highways there 
set forth is (^uite remarkable, and the remedies proposed seem eminently conserva- 
tive and just. Beginning with abuses in construction, it says: 

"The reckless and unprincipled manner in which some railroads are built would as- 
tonish many persons, and we give the following as a sample : A charter is obtained 
and a few liien get together without a dollar in ready money, form a company, issue 
construction Iwnds 'secured by mortgage ujjou the road,' and a committee of directors 
is sent to New York to ' place 'the bonds. The committee enter into negotiations with 
some prominent banker to undertake the placing of the bonds, he to get what he can 
for tbem and allow the road 70 cents on the dollar, the road to pay the advertisiug 
bills. If the committee are honest the road ultimately gets 70 cents less the adver- 
tising bills, but many committees are not honest, and as soon as they have found a 
l)anker to undertake the job at 70 they communicate with the board of directors at 
home, stating that the best they can do is GO, and ask for authority to place the bonds 
at that figure. Having their confederates at home in this inside ring, the authority 
is easily obtained, and by arrangement with the banker he settles with the road at (>0, 
aud pays 10 per cent, over to this syndicate for their personal use and benefit. If there 
is a happy combination of circumstances, such as absence of financial disturbances, 
suspensicm of the banker, «fec., and if they get all the counties, cities, and towns along 
their route to issue bonds liberally, the road may be finally built and furnished with 
rolling stock ; then our worthy friends of the board of management divi<le the stock 
between themselves without e<iuivalent, fix the rates for freight and ])asseugers high 
enough to pay interest on the face value of the bonds and i)ar value of the stock, and 
theu,.after voting themselves fat salaries, ])roceed to foist the stock off" upon an unsus- 
pecting public. As soon as the members of the ring manage to sell most of their stock 
they go to work and organize a ' Fast Freight Line,' or other Credit Mobilier institu- 
tion, to which they give a contract which soon impoverishes the road and enriches 
them, so that when the road passes into bankrui)tcy they are enabled to buy it in, 
issue new stock, and re])eat their little financial arrangement over again. In sketch- 
ing the comidetiou of this road we forgot to say that there was a 'construction' ring; 
this ring had their slice from every contract made, and not a mile was graded or tie 
laid, not a rail or engine or car purchased, not a depot erected or nail driven, but a 
percentagt^ went into the ])ocket of the ring. 

"As for the banker, by a free use of the press (who lend the weight of editorial col- 
umns to the i)roject), he succeeds in 'i)laciiig' the bonds at 90, 95, or i)ar, among the 
widows, orphans, and other unsophisticated persons of small means avIio have con- 
fidence in the banker and editor that recommend the conversion of government 



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12 



APPENDIX. 



REPORTS OF EXPERTS. 



13 



f 

1 



1 



boiuls into the 'equally reliable and better paying railroad securities.' Everytliinj^: 
jjot's on smoothly until some morning the railr(»ad stops pay in «? interest upon its bonjis, 
passes into bankrui)tey, sells for little or nothing;, and that is the ond of it, so far as 
the banker, the editor, and the person of small means are concerned. In the mean 
time the manajjers of the road find it necessary to buy the usual number of legislat<»rs, 
and retain all the best legal talent along the line of the road, in order *to protect their 
rights from the encroachments of the peoi)le,' who have languished under extortion- 
ate freight charges, and who have been groping blindly about to tind a way to reuu'dy 
the evils which, notwithstanding that they labor early and late, and raise crops which 
are the admirati(m of the world, are nuiking them poorer each year. Now, while wo 
are far from desiring an indiscriminate war upon railways, we claim that public opin- 
ion must be awakened to these abuses, and that they must be eliminated from our 
]>resent railway system. The ])eoi)le of this country are beginning to lind that these 
<lefects in our transportation system are the ' Old Man of the Sea' upon the shouhlers 
of the commerce of the country, and when they realize that the watered stocks and 
other swindles in this line are a greater burden than our entire national debt, we may 
be sure that they will in some way work out a rennuly. 

"The foreg(»ing relates principally to the defects in the manner of construction, but 
they are none the less prondnent in the operation and management of railways. Prol)- 
ably the greatest abuse in the present system of railway management is the practice 
<ommonly known as ' stock watering,' or the capitalization of surplus earnings, the 
most usual form of which is accomplished by charging high rates of freight and ac- 
eumulating a large surplus fund, putting it into improvements and then issuing stock 
to represent the value of these improvements; or, in other words, exacting numey 
from the public, and then forever after making the public pay interest on the money 
so exacted. It is argued by the a])ologi8ts for these practices that it is current among 
manufacturing and other corjiorations, but they ignore these essential points: that a 
railroad is endowed with the right of eminent domain, the right to take private proj)- 
erty because it is for public use, and railroads therefore owe some duties to the public 
which manufacturing companies do not. Again, manufacturing corporations are not 
like railroads, natural mono])olies by the very nature of their construction, and no one 
is obliged to i)atronize them, as is the case with the railroads. We cannot better illus- 
trate the practical operation of this abuse than by comparing the management of the 
' Baltimore and Ohio ' and the 'New York Central and Hudson River' railroads. Both 
of these are trunk lines, connecting the interior with the seaboard and operating nearly 
the same extent of road. The policy of the former company has been to invest its 
sur|)lus earnings in the imjirovemeut of its road, and carrying forward their cost upon 
their books as a snrjdus, while that of the latter eomi)any has been to make the same 
investment of earnings, but to issue stock representing the same. 

"This plan appears to have been initiated with the formation of the New York Cen- 
tral Railroad in 1853, by the consolidation of the ten separate corporations owning the 
route between the Hudson River and the Lakes. The combined amount of share cap- 
ital and convertible bonds of these separate organizations was then $2'A,2',if>,0()0, but a 
considerable portion of the share capital had not been paid in. The e<iualizing process 
of the consolidation was that the Schenectady and Troy Company — that being the least 
productive of all — should come in at par, while the holders of stock or convertible 
bonds of the other roads received a premium in consolidated 6 per cent, debt certifi- 
cates ranging from 17 to 55 per cent., making an issue of these certificates amounting 
to $8,894,500, or over 30 per cent, on the true share capital of the company. From this 
time down to 1867 there had been no material change in the total of stock and debt of 
the New York Central Company other than what could be nearly accounted for by 
actual value received, and its capital account was then represented by $28,537,000 of 
stock and ^12,069,820 of bonds, a total (including the 'water' of 1853) of . $40, (506, 820. 
The Hudson River Railroad Company at the same time had a share capital of $7,000,000 
and a bonJed debt of $7,227,000; total, $14,227,000; making these two companies, 
which in 1860 were consolidated, stand in 1867 as followS : Stock, $35,537,000, and 
bonds, $19,296,820, or a total capital account of $54,833,820. 

"During 1867 the Hudstm River Company presented its stockholders with $3,500,000 
stock, or a dividend of 50 per cent. ; and again, at the time of consolidation, another 
one of 85 per cent, on the then outstanding stock of $16,000,000, making an issue of 
$13,625,000. The New York Central Company had, in 1868, presented its stockholders 
with $23,036,000, or 80 per cent., followed by one of 27 per cent., $7,775,000, at the 
time of consolidation. Thus in the space of two years the now New York Central and 
Hudson River Railroad Ccmipany added to its capital the sum of $47,936,000, created 
out of nothing but the will of its directors and the mixture of paper and printers' ink. 
From 1870 to 1872 the bonded debt was increased each year by from one to two millions 
of dollars, since which it has been increased some $20,000,000 for purposes of construc- 
tion. Who shall say if any, or how nuich, of this has been additional ' water' to make 
up the necessary amount of $7,200,000 for annual dividends ? It will be seen by the 



foregoing that the known fictitious capital of this company, including the issue of 1853, 
is some $10,000,000 greater than the real capital which had been invested down to 1869. 

'' In the one case the liabilities re])resent about $40,000 per mile of road, and in the 
other about $130,000. Both pay about the same dividends, and it certainly requires 
no mathematical ability to comprehend the fact that, in order to do this, the latter 
road must on the same traffic charge the public a much higher rate of transportation. 
The roa<ls mentioned have been selected only because they are conspicuous exainples, 
and to our shame be it said, that aside from the Baltimore and Ohio there is not 
another trunk line of railroad in the United States to hold up as an example of honest 
railroa<l management. The entire railroad system of the United States is tainted with 
the same practice, and it is estimated that about one-half of the stock of the entire 
body of railways in this country has been thus manufactured. There are other abuses 
connected with the management of railroads, such as fast-freight lines run by outside 
companies, the stock of which pays enormously, and is owned by their directors, 
superintendents, and other employi^s. These fast-freight lines now do much of the 
business of the country, and although within the past few years many of them have, 
in deference to public opinion, been changed from the non-co-operative to the co- 
operative system, yet those of the old style which remain are gradually sapping the 
life of the railroads over which they run. They should be driven out in every case, 
and their business should be done exclusively by the railroads themselves. The palace 
and sleeping-car and express companies are another excrescence upon the railroad sys- 
tem of the country ; and from the fact that they now own from ten to twenty million 
dollars' worth of cars, bought mostly from profits, they should be bought out by the 
railroad companies, so that the profits would go to swell their general revenues. 
Many railroad managers, superintendents, and other officers, are interested in coal 
mines, saw-mills, farms, and manufacturing establishments, and give themselves lower 
rates when other people are paying higher rates for the same accommodation. These 
gentlemen and the master mechanics are frequently interested in patent boxes, patent 
lubricators, patent ventilators, i)atent brakes, and patent fastenings, and are thereby 
induced to use their own when they could get cheaper and better ones with advantage 
to the roads and their stockholders. Their road-masters are interested in patent frogs 
and crossings, patent joints, and patent track-tools. General freight agents are inter- 
ested in equipment companies and fast freight lines, and make money by giving 
rebates, drawbacks, and si)ecial rates, or by furnishing cars to shippers who will pay 
a bonus and denying them to such who will not, or do not, know the ropes. Passen- 
ger agents share the spoils of the ' scalpers.' Purchasing agents exact and pocket com- 
missions on all the sui>plies and materials purchased and used in the various depar^ 
ments. Paymasters have been known to levy a tax upon all orders accepted and paid 
by them. 

"And, in addition to all this, lavish and extravagant ex])enditure by the managers 
has been the rule rather than the excei)tion. The money paid by the public for trans- 
portation, instead of being carefully husbanded and applied to the payment of the 
proper dividends to stockholders, has been used to influence legislation, and much of 
the corruption among men in public life may be traced directly to this source. The 
history of the Credit Mobiler is yet fresh in our minds, and in the report of a committee 
appointed by the legislature of the State of New York, in 1872, to investigate the affairs 
of the Erie Railroad, we find the following : * It is furlher in evidence that it has been 
the custom of the managers of the Erie Railway, from year to year in the past, to spend 
large sums to control elections and to influence legislation. In the year 1868 more 
than $1,000,000 was disbursed from the treasury for ' extra and legal services.' For 
interesting items see Mr. Watson's testimony, pages 33ii and 337. 

"Mr. Gould, when last on the stand and exaudued in relation to various vouchers 
shown him, admitted the payment, during the three years prior to 1872, of large sums 
to Barber, Tweed, and others, and to influence legislation or elections; these amounts 
were charged in the ' India-rubber account.' The memory of this witness was very 
defective as to details, and he could only remember large transactions ; but could 
distinctly recall that he had l)een in the habit of sending money into the numerous 
districts all ov(^r the State, either to control nominations or elections for senators and 
members of assembly. Considered that, as a rule, such investments paid better than 
to wait till the men got to Albany, and added the significant remark when asked a 
question, that it would be as impossible to specify the numerous instances, as it would 
to recall to mind the numerous freight cars sent over the Erie road from day to day. 
(See testimony, p. 556.) 

" It is fiot reasonable to suppose that the Erie Railway has been alone in the cor- 
rupt use of monev for the purposes named ; but the sudden revolution in the direction of 
this company has"^laid bare a chapter in the secret history of railroad management such as 
has not been' permitted before. It exposes the reckless and prodigal use of money, wrung 
from the people to purchase the election of the people's representatives, and to bribe 
them when in office. According to Mr Gould, his operations extended iutol.four dif- 



:f^i 



p 



■te^^ir 



I 



I 



I 



J 



1 



14 



APPENDIX. 



fereut Stato.s. It was bis custom to contribute mouoy to influence botb nominations 
and electiouiJ.' 

"Tbe foregoing will serve to indicate tbe defects and abuses of our present system 
of railway management, althongb tboae we bave enumerated are bj' no means all of 
tbem. We may now, however, properiy proceed to consider tbe remedies. 

"Tbia oi)ens up a wide range of discussion, but wo propose to confine ourselves to 
those remedies which experience has denu)nstrated to be practicable. State regubi- 
tion of railways by making laws which fix rates is, as a whole, impracticable; the 
moment you attempt to regulate the details of railway management by specific enact- 
ments, that moment you fill the statute-books with a mass of laws which benefit only 
the members of the legal profession. 

''There are, however, certain general laws which work well in practice, and which 
every State should enact for the regulation of railroads which are exclusively within 
its borders. 

** Under this head we may enumerate the following : 

*' 1. A law providing a board of railway commissioners, with jiowers similar to 
those possessed by the railway connnissioners of Massachusetts. 

'*2. A law to prevent stock inflations similar to the one now in operation in Massa- 
chusetts. 

"3. A law providing for the publication at every point of shipment of rates and fares, 
embracing all particulars regarding distance, classifications, and rates, which should 
be the same to all persons under similar conditions, and prohiluting the increase of 
such rates above the limit named in the publicaticm without giving the public reason- 
able notice. 

*'4. A law prohibiting oflQcers or directors of railways from either directly or in- 
directly owning or becoming interested in any non-co-operative fast-freight line or 
car company, or from being interested in any manner in the furnishing of supplies to 
any company with which they may have official connection. 

"5. A law ])rohibiting railway com])anies from acquiring or holding more real estate 
than is necessary for the operation of their roads, and probihiting railroad comi>anie,-j 
or otficers of companies from engaging in mining or any business other thaii thai; 
of transi)ortation. 

" 6. A law niaking it a penal offense for any public official to accept or use the free- 
pass of any railway company, and prohibiting railway companies from granting such 
passes to any but regular emi)loyes of such railways. 

'*7. A laAv proTiding that all conunon carriers shall receipt for quanfitt/, whetheT 
it be of grain or other commodities, and to deliver the same at its destination. 

"8. A law prohibiting represent a tivcM of the people who belong to the legal pro- 
fession from iM'ing retained on either side in cases where the public interest is involved. 
" Of these all but the first should also be national laws, and in addition Congress 
should also provide a dejiartment or bureau of commerce, for the j»urpose of obtain- 
ing and preserving statistics relating to our internal commerce, to the end that intel- 
ligent conclusions may be arrived at in matters pertaining to this great interest.. 
There is no one thing that strikes the student of the tran8i)ortation problem so forcibly- 
as the amazing carelessness and neglect that has left a connnerce so great without 
the ordinary facilities for obtaining even a correct idea of its extent. The total of th« 
exports an<l imports constitutiug the foreign commerce of the United States for the 
year 1873 were under five hundred millions of dollars, while it is estimated that thti 
value of products transported on all the railways of the Unite<l States for the sanus 
period w as upward of ten thousand millions. The commerce of the Ohio River was 
estimated at sixteen hundred millions ten years ago, and at this rate the entire do- 
mestic connnerce of the country would at this time probably not be less than fifteen 
thou.sand millions of doll3i*s." 

That such an enormous connnerce as tbis is worth attention, and that the abusew 
enumerated require regulaticm in the interest of the public, no one can deny. That 
the various States possess the poAver to regulate the roads exclusively within their 
respective borders, and that Congress also has the power over inter-State ccuixu-ations, 
is generally conceded. These powers were specifically defined by the United Stateb 
Senate Connnittee on Transportation Routes as follows : 

"First. That the powers of Congress whatever they may be, are derived directly 
from the peojde of the .several States, and not from the States themselves. 



a 



Second. That every important word in the clauses which confer the 'power to 
regulate c(nnmerce among the several States,' and to 'make all laws which shall be 
necessary for carrying it into execution,' has received legislative, executive, and judicial 
construction, and under such construction the power of Congress to regulate inter- 
State transportation by railroads, and to aid and facilitate commerce, is clearly estab- 
lished. 

"Third. That in the exercise of this power Congress is authorized, under the grant 
of auxiliary power, to employ such means as are appropriate and plainly adapted to 
their execution. 



REPORTS OF EXPERTS. 



15 



"Fourth. That in the selection of means by which inter-State commerce shall bo 
regulated. Congress may — 

"1. Prescribe the rules by which the instruments, vehicles, and agents engaged in 
transporting commodities from one State into or through another shall be governed, 
whether such transportation is by land or water. 

"2. That it may appropriate money for the consfruction of railways or canals, when 
the same shall be necessary for the regulation of commerce. 

"3. That it may incorporate a company with authority to construct them. 

"4. That it may exercise the right of eminent domain within a State in order to 
provide for the construction of such railways and canals]"or, 

"5. It may, in the exercise of the right of eminent domain, take for the public use, 
paying just compensation therefor, any existing railway or canal owned by jirivate^ 
persons or cor]>orations." 

And these opinions have since been substantially confirmed by the decisions of the 
United States Sui>reme Court in the "granger cases." In view of these broad princi- 
plesof equity, so authoritatively defined, it is, perhai)S, not toonnichtohope foragradual 
elimination of the abuses in our transportation system which have so long been a bur- 
den upon the industries of the people. 

Statement prepared by Mr. Thnrher, in reply to an inquiry touching the influence of capital 
upon the course of trade, and the rdative power of capital and of the economies of trans- 
portation upon prices and upon the course of trade. 

Sir: In answer to your supplementary question in regard to ''the influence of capi- 
tal upon the course of trade," and in which you recjuest an expression of my view* 
upon "the ]>ersistent power of the capital of New York City toward maintaining her 
commercial supremacy," I would say that it is manifestly imi)08sible to condense 
within a few pages a satisfactory answer to a question which opens up .more or less 
directly a wide range of politico-economic questions, but I may sunnnarize them as 
follows: First, while capital undoubtedly does exercise a considerable influence as 
hereinafter sl^own, it is entirely .subordinate and secondary to other essential condi- 
tions. Great connnercial cities are dependent upon geographical position, upon cli- 
mate, upon harbors, upon acces.sibility to the .sources of supply of the products which 
make connnerce, and in later years, perhaps more than all, are de])endent upon trans- 
portation facilities which are" nu)st potent in attracting or repelling connnerce. Of 
course capital has much to do with providing tran.sportation facilities; and ca])it*il 
controlling the jiower of steam has done much to change the channels of trade which 
hall or CAen a qnarter of a century since were thought to be fixed and innnovable. 
It is in this direction, perhaps, that the power of capital in controlling trade is most 
noticeable. Englislrcapital invested in .steamships has reached out to the four (luarters. 
of the globe, attracting the connnerce of the world to English markets. In this coun- 
try the capital of the seaboard States, and to a considera])le extent that of Europe, 
invested in railroads, has carried the productions and sui>plies of the great West over 
mountains and rivers along our paraUels of latitude, when it would seem l>y all the 
natural laws of trade they Avould have sought the .seaboard by means of the great 
rivers which iienetratetbe'country longitudinally ; and capital embodied in the labor- 
saving, wealth-creating, wonderful steam-engine has revolutionized the entire com- 
mercial, jxditical, and .social organization of the world. Bnt this ])ower has become 
.so widely diflused, and is so generally used by all the great commercial cities, that it 
may be said the greater cai)ital which New York controls does not, in the way of 
transportation facilities, give her any advantage. Indeed, as regards railroads, she 
may be said to be at a disadvantage, for her railroads are controlled by peisons who 
selfishly (and I believe shortsightedly) operate them without regard to the commercial 
interests of New York, and thus abrogate, to a considerable extent, thy advantage 
which New York has long enjoyed of having during .seven months of the year Avater 
trans^portation Avhich has, jirobably more than anything else, contributed to her 
commercial supremacy. There can probably be no moie striking exanqde of the 
poAver of capital iuA-ested in tran.sportation than Avhat has been accomplished hy 
the few millions which the people of the State of New York Avi.sely invested in 
the Erie Canal, lint I have perbajjs said enough ui)on the i>oAver of capital in- 
vested in transjjortation facilities controlling trade, and Avill uoav proceed to con- 
sider how far the influence of capital controls trade at certain centers and upon 
certain lines by capitaliziny commodities in movement. In your connnunication you say : 
"I have seen it stated that the capacity of capitalizing commodities in movement by 
drawing again.st a fixed time in transit and deliA'ery, upon the basis of the value of 
the commodity, exercLses a .strouger influence oA^er prices and over the cour.se of trade 
than does the economy of transportation." So far as the influ(»nce over prices is con- 
oemed, this may be correct. If there be not suflicient cajntal to moA-e the commodities 
produced, they naturally decline in value, or, in other Avord.s, more Avould have to be 
given for a dollar than if ^the supply of capital was in larger ijroportion to the supply 



16 



APPENDIX. 



of commodities to be moved. This tnitli is doubtless at the root of the popular demand 
HI many parts of tlie country for more currency, but when we consider how infinitesi- 
nial IS the proportion of the exchanges effected by the gold, silver, and paper currency 
of the country as compared with checks and bills of exchange, the importance of this 
issue sinks out^of sight, and I cannot l>ut conclude that it has assumed undue impor- 
tance among the public questions of the day. How large the exchanges effected bv 
other mediums than the paper and metallic money of the country it i^ impossible to 
say or even to estimate but we may catch a glimpse of its immensity in the transac- 
I^^V/ ?!*" New York Clearing House (which, as is well known, is a contrivance i^ 

vP^?nf'iii~ i^i'te^^ ^'^''^ ^V^^l with each other), and which were during the 

year of 187/ $24,663,240,003, nearly all of which was in the form of checks and drafts, 
and It 18 n(^ perhans too much to say that all the currency in the United States could 
not have effected these exchanges which were so quietly and easily done by these bits 
ofpaper. The idea has gained a wide circulation that bank capital is employed in 
grinding the face of the poor and cheating the producer out of the proceeds of his labor, 
but I think a careful examination will show that the efforts of railroads to earn inter- 
est and dividends upon their watered securities by charging exorbitant rates of 
freight IS a greater burden upon all classes of citizens than the interest paid by bor- 
rowers upon the capital borrowed. In the latter case, at least, the bonower pay's only 
npon what he receives, and he has the opti(ui of whether he will borrow or not ; in the 
lormer, the public are obliged to use the accommodation furnished by the railroads and 
to pay the amount demanded for the service. 

I cannot better illustrate the services performed by bank capital than by quoting 
the words of Professor Sumner, whosaysthat " banking capital renders very important 
jer>'ices in that it throws the burden of waiting between producer and consumer on 
the idle capital of the country and releases the capital engaged in production so that 
It can be at once re-employed. Modern commerce cannot be carried on without bank- 
ing tacihties ; they are part of the modern system. The economy is obvious and enoi- 
mous, banking capital making commerce move many times more rapidly than it could 
without banks." 

I might pursue this branch of the subject into commercial credits, which still further 
increase the tacilities of exchange. They are of course founde«l on capital, but depend 
largely on other considerations, and can be amplified many times beyond the amount 
of the capital upon which the credits are based; but to return to the proposition 'Hhat 
the ca]>acity to capitalize ccmimodities in movement exercises a stron^tT influence 
over the course of trade than does the economy of transportation," I must say that [ 
do not think it is borne out by the facts. The reasons for this are given so concisely 
and forcibly in a paper by Mr. A. E. Oir, a merchant of this city, that I quote themak 
an expression of my own views, as follows: 

/* The proposition that the persistent power of the capital of the city of New Yorl- 
wiU maintain her commercial supremacy is, in my opinion, a fallacy, 'and one which 
If persisted in as being the major element in maintaining supremacy will in time surely 
rob New |ork of her legitimate commercial birthright, because in holding this delu- 
sion closely in view she will continue blind to those influences which in the past few 
years have been so busy and of late so terribly energetic in competing with her for a, 
large part of her foreign and domestic commerce. 

"It is said the ostrich when closely pursued by its pursuers will bury its head in 
the sand, and in this position imagine itself safe from harm. New York is not alto- 
gether tree from the responsibility of having practised the foolish confidence of the 
ostrich W hile Canada has been actively enlarging the Welland Canal, Boston boring 
through the Hoosac Mountains, Philadelphia and Baltimore opening up new paths to 
the granaries of tlie great West, whilst even sleepy New Orleans has been deepening 
the delta of the Mississippi and awakening to the importance of attracting to herself 
the commerce of those States bordering on her great river and its tributaries. New York 
has done little else to retain her commercial acquisitions than study the records of the 
past, and when cautioned against the aggressive action of her seaboard sisters, noint 
to her bank balances and laugh at their attacks. 

*'I do not wish you to suppose that I fail to appreciate the importance of capital in 
relation to the course of trade. It is a very necessary auxiliary, and in a country 
where comparative poverty is the rule and means of transit limited and defective its 
sway may be all important to control and dictate. But in a country like the United 
States, where wealth is diffusive, where mercantile productions are 'almost limitless 
where means of transportation are su])erior to those of any country in the world and 
constantly increasing, and whose surplus productions are sought at her own seaboard 
by almost every civilized market, capital is not the controlling element that will local- 
ize commerce, but on the contrary the place that will present the most remunerative 
trading will be sought by capital. 

" New York W!is not always the financial center of the United States. In the early 
days of Amencan commerce, when she could only count her wealth by thousands 
other cities could point to theirs in tens of thousands. It was not until a producing 



REPORTS OF EXPERTS. 



17 



country became her tributary through the means of cheap transit facilities that New 
York began to assert her financial Jind coiumercial ascendancy. Then it was that the 
surplus of our home products sought her in trade, because they <;ould l»e jdaced here 
cliea])er than at any other market on the coast, an(| then it was that the products of 
the foreign looms were landed at her wharves, because they could be marketed in the 
interior to better advantage than by the more expensive routes offered by ot\utr sea- 
board cities, and be(;ause (and tins is a very impoitaut item in the calculation) tlir 
vessel whirh brought the foreign luxuries or ne(;essaries was assured of a return cargo 
of lioine-grown surplus producticui by c(uning to her'port. If the Erie Canal ha<l ter- 
minated at Boston instead of at New York, which city to-day would have, been the re- 
roguized ciuumercial nu'tropolis of the United States f If capital can luaiutaiii <-om- 
mercial supremju;y, from wlience did New York obtain her commenre and her ca|»ital f 
I do not know, Init if the query is ]nit in the negative the answer is very plain. She 
first secured transit facilities with the interior superior to those of any eonipeliiig point, 
then the suri>lus j>roduetionof the country sought her as a market, and then the trade 
that she had to otter the capitalist attracted to her his capital. 

"Let me giv«' you a juactical illustration of this law of trade which came to my 
notice only a few days ago. Two hundred thousand bushels of corn in Chicngo was 
seeking a market at the seabo.ard. The ((uestion ('(mtrolling its destinati(ui was not 
the financial strength of the city to be selected, but which market on flu* Atlantic 
coast would yield the largest return to the ship]»er. An M]»p1ieation cam<* to a linn in 
New York in tlies<? words 'Will you advame on two hundred tluuisand buslu'ls of 
iforn to be shi]q)ed to Baltimore?' They answered, 'jYes; but why to Baltimore in 
jNn'ference to New York?' The reply came, 'Transportation to Baltimore is half e«'nt 
]>er bushel less than to New York.' And so the corn went to Baltimore; and just so 
much was adde<l to her <'(Minnercial strength by N«'w York japif.al. This corn was not 
controlled by ea|»ital, it could select its own market, and having sele<t<'d Baltimore, 
because the sum of one thousand dollars could be sav«Ml in tians]>ortatioii eharges. 
New York capital followed it there for the reason that it was idle and Baltimore ottered 
it employment. 

"Follow this transaction a little further. Six vessels will find in Baltimore six 
cargoes of c<un awaiting them; and she will rec<nve the inward cargoes of those six 
vessels ]>ecause she can supply them with return freights. Now what think you? 
Was it BaltiuKue's chea]M'r transpoitation charges, as against competing points, or 
New York's idle eapital tliat procured for the former all the advantages arising out of 
this corn shi})iu«'nt f 

"Having shown that capital is im]>otent to attract trade wlu'u opposed l»y the 
magnet of cheaper trans])ortation, let me first point out as nearly as ]>ossible the 
mciasuie of loss which New York sustained in this single transaction, and then suggest 
the remedy. 

"If the corn in (|uestion had come to New York at the same rate of transj>orfation 
as charged to Baltimore, six and a half cents ]>er bushel (including the terminal 
charges in New York), or thirteen thousand dollars would have been flu? a<;tual amount 
<*ontributed for transportation within the borders of our State. Of this amount tlu' 
State of New Y(uk would have received fVu- tolls I'i.OOO, and the industrial poilion of 
the ]»opulation f^l 1,000. These figures only represent the measure of the ]M>sitive 
known loss. The loss arising from the non-arrival of the six vess«*ls at our ]unt with 
their incoming cargoes, the handling and storing of these cargoes, and their final sale 
and transportation in great nuiasure into the interior can only be matter of conjecture, 
but must also be taken into the estimate of the total loss sustained. Nor is this all. Bal- 
timore having demonstrated the fact that she can give r«;turn cargoes to these six ves- 
sels, will imluce a return on their part to her i)<»rt with six additional companions, to 
the continued detriment of the foreign commerce of New York. 

"It has been shown that one-half cent per bushel or tin; sum of 11,000 turne«l this 
com from New York to Baltimore. It is also shown that the tax that would have 
been claimed l>y the State of New York, if this corn had passed through her canals, 
was $'2,000. It is therefore evident that it was the toll charge made by the State that 
turned the corn from New York to Baltimore, and that through that <lemand, not only 
did the State fail to receive any toll whatever, but the industrial classes of the State 
failed to receive the sum of $11,000, which otherwise would have come into their pos- 
session. 

" In 1870 the toll charge of the State was reduced to three cents per bushel ; in 1875 
it was reduced to two cents per bushel ; in 1877 to one cent. Why * Because western 
productions were seeking other routes to the seaboard which were cheaper than by 
the Erie Canal. This toll charge stimulate«l the constru<;tiou of these routes just as 
unhealthy ]>rotection, by means of large tariff' duties, stimulates over production of 
home manufactures. If a liberal policy had been extended to the city and State by 
making the canals free, these competitive routes would nt ver have been constructed ; 
and New York to-day would undoubtedly be, as she yet claims to be, the commercial 
metropolis of the United States f 

2 I C 



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18 



APPENDIX. 



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of tl.c taxe, coUectea f„r the i"pp™t ofthe Se ? ■'^' ""'^"^"*'-' '"•""' «""> ''alf 
;! L^'" ?"* *"'' >■<""' ♦•■>«' with <liscus.siiijt this subject. 

Of tine quality, requiring, tee ^apit^^^^^ 

more liberal terms ami tlius rndn^fa arVr p^rom e tU l '' ^^«« '^^^^ *« ^''^'^ 

=^i;\^;;,n;^:^;--re;'c£r"-'^-'«-"-^^ 

hv^New Yo,r't'!nnn^ to a considerable extent, nentralized the advanta^^es enioyed 




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